Correlation Between Luminar Technologies and Aeye

Can any of the company-specific risk be diversified away by investing in both Luminar Technologies and Aeye at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Luminar Technologies and Aeye into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Luminar Technologies and Aeye Inc, you can compare the effects of market volatilities on Luminar Technologies and Aeye and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Luminar Technologies with a short position of Aeye. Check out your portfolio center. Please also check ongoing floating volatility patterns of Luminar Technologies and Aeye.

Diversification Opportunities for Luminar Technologies and Aeye

0.08

Correlation Coefficient

Luminar Technologies  Aeye

Significant diversification

The 3 months correlation between Luminar and Aeye is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Luminar Technologies and Aeye Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aeye Inc and Luminar Technologies is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Luminar Technologies are associated (or correlated) with Aeye. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aeye Inc has no effect on the direction of Luminar Technologies i.e., Luminar Technologies and Aeye go up and down completely randomly.

Pair Corralation between Luminar Technologies and Aeye

Given the investment horizon of 90 days Luminar Technologies is expected to under-perform the Aeye. But the stock apears to be less risky and, when comparing its historical volatility, Luminar Technologies is 1.96 times less risky than Aeye. The stock trades about -0.59 of its potential returns per unit of risk. The Aeye Inc is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  107.00  in Aeye Inc on September 27, 2024 and sell it today you would earn a total of  6.00  from holding Aeye Inc or generate 5.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Luminar Technologies  vs.  Aeye Inc

Luminar Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Luminar Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Even with fragile performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Aeye Inc

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Aeye Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal fundamental indicators, Aeye may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Luminar Technologies and Aeye

The main advantage of trading using opposite Luminar Technologies and Aeye positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Luminar Technologies position performs unexpectedly, Aeye can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Aeye will offset losses from the drop in Aeye's long position.

The idea behind Luminar Technologies and Aeye Inc pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Share Portfolio module to track or share privately all of your investments from the convenience of any device.